It’s time to get serious about innovation in the legal department

I recently spoke to a group of chief legal officers about the challenges they face and innovative ways to address those challenges. Our discussion that day and the conversations that we have had since prompted me to share some of the points from the presentation and, more importantly, some of the insights gleaned from our conversations afterwards.

I wholeheartedly believe that currently in-house legal departments face a unique challenge caused by the convergence of two key trends. The first is that on average the demand for legal services in most areas is increasing. The in-house legal department has more on its plate this year than last year, and there is no reason to believe that the need for legal services will plateau or decline in the next 18-24 months. Secondly, in spite of the increased need for legal services, on average most budgets for legal services are decreasing. The in-house legal department is being asked to do more work than last year, but is being given fewer resources to do so. These two trends converge to create a nightmarish scenario in which there are more fires to deal with, but less water with which to put them out. In the parlance of the presentation, we talked about this challenge as doing even more with even less.

So how are legal departments responding to this challenge? Well, first it is helpful to make sure that we deconstruct the problem and address each part of it separately. The legal department has to:

Do more.

Do it with less.

Many of the people I spoke with after the presentation were well versed in potential solutions to the latter. We discussed different ways to control expenses, with the most common solution being to cap rates, freeze rates or explore alternative fee arrangements. We also discussed in-sourcing a variety of functions typically left to outside counsel, and even the prospect of outsourcing some of these functions overseas. At the end of these conversations, after thoroughly considering the pros and cons, there was still a sense of dissatisfaction. And this, I explained, is the problem with the cost-centric approach to solving this problem.

You certainly get your work done for less, but you have not explored ways to get more work done for less money. Typically, chief legal officers felt that in order to get more work done, or higher quality work at least, they would have to pay accordingly. So I offered a different question to help frame the next part of the conversation: how do we get the work of 10 lawyers for the cost of only 5 lawyers? At this point in the conversations, there was far less confidence in the answers I received, but we discussed that hubris was misplaced in such a discussion anyway—answers would present themselves to those who sought them.

Because e-discovery is the area that I deal with most frequently when it comes to solutions that reduce the need for human review hours while providing even better results than larger teams of human reviewers, I shared some experiences with how automating these types of processes allow you to get more with less. We discussed recall levels, and showed that a properly trained algorithm truly is better at finding documents than human reviewers, who can be distracted, bored or uninterested. Algorithms, on the other hand, are always on time and are never sick at sea. But this is not the only way that an innovative approach to a problem can reap rewards down the road.

In fact, for all of the complex, high tech solutions out there, sometimes the most effective technologies are relatively simplistic. I firmly believe that a comprehensive legal project management (LPM) program can be the most effective way to get more for your money. By employing LPM as part of the overall strategy for everything that outside counsel does, you (and your outside counsel) become more adept at spotting inefficiencies in workflows and eliminating waste. This reduction in waste frees them to do more work for the in-house legal department, but takes less time overall. But just implementing the program is the first step of a truly transformative process. Over time, the LPM regime allows for metric tracking, built-in quality control measures and increased focus on customer satisfaction, as well as actually tracking what customers think about the delivery of services. Some in the profession are already doing this, and I applaud their efforts and hope they will continue to reap the benefits of these programs.

What struck me in the conversations I was having was the number of in-house lawyers who were struggling to get such programs implemented, or having problems getting outside counsel to adhere to the program. We have to put our money where our collective mouth is: If we truly want to get more done with less, then we have to demand the tools necessary to accomplish that goal. In-house legal departments are consumers of legal services, and believe me, there are hundreds of law firms that not only want to do your work, but are more than capable of doing it for less than you are currently paying. Remember that, especially in this economic environment, the consumer truly is empowered to demand the services it needs, and not just take the services that are offered.

Reduction of costs is key, but ultimately our discussions focused on the more esoteric concept of value. One definition of value that we developed through conversations was the idea that receiving something of greater strategic import, even if for the same price, is more valuable. Certainly getting something of greater strategic import for less would be even more valuable. Therefore, I encouraged them to evaluate innovative solutions in terms of the access they allow to valuable information for less cost. We discussed software solutions for automated patent analysis and contract analysis that would reduce the number of hours while providing more robust and detailed information. We discussed how predictive coding was designed with this in mind, and allows a level of insight into cases in timeframes once thought inconceivable. This is far more than just reducing billable hours—this is true value.

Once we reached this point in the conversation, it was time to make the point that I think is most critical when talking about innovative solutions to challenging problems. Specifically, we had to talk about failure. And this is a point that many lawyers do not like to think about, because failure is an anathema to much of what we do. But we discussed that for innovators and inventers throughout human history, mistakes would happen and the only real failure was the failure to learn from those mistakes. It takes an entrepreneurial view, but in order to truly revolutionize your legal department and be prepared to meet the challenges of tomorrow you must be willing to experiment and adjust. Failing is just part of the process, and every time we fail is an opportunity to learn a better way forward. If legal departments will commit to this perspective, it will become possible to find new ways to get even more done with even less.